Although he came to Romania for the first time less than two weeks ago and stayed less than two days, the Italian said Romania has investment potential, and that he would in fact be willing to invest in several local companies.
“I would invest in one or more retail companies because there are business opportunities on any segment of this sector. You only have to find a player that’s relevant for consumers, one with advantages over competition.”
Looking at Romania in terms of its evolution over the past 23 years, Bottoli said he has noticed a set of major changes for the good and that they will not end here.
“Romania will develop in the long term, although periods of growth will continue to be interrupted by declines.” As operating partner within investment fund Advent International, Bottoli said there is investment potential in Romania. Currently Advent is holding talks with several local entrepreneurs and Bottoli said the fund tends to be interested in five sectors – industry, financial services, telecom, retail and medical services, and that the local market is no exception.
Romania has been affected by the international financial and economic crisis in the past few years, and this has shown in the volume of foreign investment. In the first four months of the year, investment amounted to EUR446 million, down almost 10% year-on-year. And this after direct investment fell 13.6% last year against 2010, to EUR1.917 billion, hitting a nine-year low.
In order to turn things around, Bottoli said Romania should simplify legislation. He admits, though, that reforms such as privatization, introduction of the flat rate and the gradual simplification of bureaucracy “contributed to improving Romania’s image, making it more attractive for foreign investors.”
He added that the economy could become attractive for foreign investors through clarity, transparency and predictability. “Romania should make efforts to improve on these aspects and growth will follow inevitably.”
Bottoli, who previously worked for companies such as Procter&Gamble, Reckitt Benckiser, Louis Vuitton and Samsonite, believes Romania has the potential to recover after the difficult times of 2009 and 2010 generated by the world crisis. But in order for this goal to be reached, it is necessary for “both the actions of private players and public measures to reflect a strategy for sustainable growth, not just immediate, opportunistic gains.”
He says Romania is similar to all emerging economies in that it has a potential to buy and an appetite for luxury products, making it a target for companies in the sector.
Tradition of cheap labor
Louis Vuitton was one of the first luxury brands to enter the Romanian market in 2008 by opening a store in the shopping gallery of Bucharest’s five-star Marriott hotel.
The French company entered the Romanian market directly while rivals Gucci, Burberry, Valentino and Hugo Boss preferred to use franchisees.
“Louis Vuitton has a long tradition of opening stores on markets with potential early on, so they predicted Romania’s long-term evolution as a luxury market,” said Bottoli.
In the past few years, increasingly more luxury brands tapped the Romanian market despite the consumption decline of almost 20% between 2009 and 2011.
“Romania has a long tradition of attractive labor costs and, much more importantly, of skilled labor.” This can work towards the development of a solid production segment and of a similarly strong economy.
There is still room for growth
However, the economic crisis eliminated 100,000 jobs from the Romanian textile industry, known as one of the sectors with tradition on the Romanian market. Currently, the around 8,000 companies in the sector have just 217,000 employees left, just over a third of the numbers in 2008, the last year of economic boom.
Another important factor that affected the local textile industry was the fast rise of the Asian market, which boasts cheap labor.
“Anyway, with around 19 million inhabitants and a growing middle class, Romania has a genuine ability to develop consumption of luxury products over time.” Although he is reluctant to say whether brands such as Chanel or Hermes could join the market in the next few years, Bottoli explained that traditionally Louis Vuitton has been a trail blazer for new luxury markets, with the other brands following suit a few years later.
As for the overall retail market in Romania, Bottoli believes there is still room for growth. The main engines of a retail market are purchasing power (driven by GDP growth), the availability of retail infrastructure and supply. Romania is very promising in this respect.
“The recent expansion to Romania of major retailers of food and non-food retailers, such as Inditex, H&M and Lidl, is proof of this. We must not forget that communism fell in Romania ‘only’ 20 years ago, so there is demand that has yet to be met,” he added.
(English version by Daniela Stoican)